A healthy credit record improves your chances of qualifying for a loan
Published: February 3, 2020
Categories: Financial Wellness & Emergency Loans
Tags: Credit Health, Emergency Cash, Financial Health, Financial Planning, Financial Tips
If you needed access to emergency cash today, would you be able to apply for a short term loan?
You might think that you could easily qualify for a personal loan, however credit providers need to evaluate your credit health before they can make a decision in regards to your credit worthiness.
Credit bureaus have access to your full credit record which is essentially a full record of your financial history and credit behaviour. Without you even realising it, you build up a credit record every time you open an account, apply for a credit card, get a loan or sign a lease agreement. And every payment you make – or miss – is added to your credit history.
A credit health report includes the following information:
- Personal information that identifies you, including your name, ID number, all known addresses and telephone numbers, as well as your employment history.
- Details of all the bank accounts, clothing or furniture accounts, credit cards, personal loans, home loans, car loans or any other form of credit that you have taken out with any credit provider.
- A full record of your payment history for every account over the past 24 months, including whether or not you pay the correct amounts on time.
- Any legal action, defaults, demands or judgements that have been taken against you for the not honouring your credit commitments. A warning will also appear if you are under administration or debt restructuring.
- Details of anyone who has requested copies of your credit record in the past year. This means that you are able to see who has looked into your credit history and when. It is very important that you check that no enquiries were made which you were not aware, as this could mean that someone is trying to apply for credit in your name.
- If you have ever been a victim of fraud, there will be a fraud alert on your credit report.
Your credit report is not a secret. You can get a free report once a year. Given how big a role your credit report plays when you apply for credit, as well as the risk of identity theft and fraud, it is a good idea to do so. You should always know what your credit report says about you so that you can identify and rectify any errors proactively, rather than when you are in a tight spot and need a loan urgently.
Here are examples of the kind of information on your credit profile that could be concerning credit providers:
- You have applied to get a loan, enquired about a loan or opened a number of accounts with multiple credit providers over a short period of time.
- It appears that you might be using one loan to pay for another.
- You have too many accounts open at any given time.
- You have missed a number of payments with any credit providers.
- You have reached your maximum credit limits with some or many of your credit accounts.
- You do not have a long enough track record of good payment history.
- You only use one type of credit, for example, short-term loans (less than six months).
Your financial wellbeing and creditworthiness depends on your ability to work smartly with your money. Your credit health report will give you a good indication of how well you are managing your debt.
Should you wish to discuss the various debt management and credit options available to you, who will guide you through the process of applying for a personal loan responsibly.